Value for Money Self-Assessment Statement – 2014/15 Final

Unity Housing

Value for Money

Self-Assessment Statement

2014/15

CONTENTS

1INTRODUCTION

2VALUE FOR MONEY STRATEGY AND LINK TO CORPORATE OBJECTIVES

3VALUE FOR MONEY – OUR APPROACH

4VFM GAINS – PAST AND PRESENT AND HOW WE RE-INVEST

5MONITORING AND BENCHMARKING PERFORMANCE

6RETURN ON ASSETS AND THE SOCIAL RETURN

7ENGAGEMENT AND SCRUTINY

8OUR FUTURE PLANS

9OUR OVERALL SELF-ASSESSMENT

Appendix 1 – Unity HA Operational Benchmarking Q4 2014/15

1INTRODUCTION

1.1Unity Housing Association(UHA) places Value for Money (VFM) at the heart of everything that it does. This statement has been developed to ensure that our key stakeholders understand what we have done in this area and what we aspire to do in the future.

1.2We have provided what we consider to be an honest assessment of how well we are doing in delivering VFM, acknowledging that it is a continuing journey, which provides tangible benefits for the organisation, tenants and other stakeholders.

1.3We have a significant record in the delivery of financial results and in achieving Value for Money (VFM). This document sets out our Self-Assessment Statement for 2014/15 and it records our recent achievements with transparency and integrity, making comparisons with others and providing as much detail as we feel is necessary for a rounded view of the organisation’s progress on these matters to be secured.

1.4Highlights for this year include:

  • An increase in our surplus to £1.09k in 2014/15 to support ongoing reinvestment in existing stock and new homes.
  • Affordable warmth. Our objective in respect of delivering affordable warmth has been met by our fabric first approach which has delivered an average SAP rating of 73.7 across our stock.
  • Increased employment and skills training.
  • We have grown the business and increased our stock numbers to meet the requirements of our corporate plan.
  • We have increased levels of customer satisfaction with our repairs and maintenance service.
  • We have continued to achieve the necessary standard to retain our accreditationof the Investors in People awardand for Customer Service Excellence.
  • We have achieved considerable success with our activities in the field of financial inclusion.
  • Our rent collection figures have improved by 0.88%.
  • We have reduced our void turnaround time by 1.8 days.
  • We recognise the value of retrospective reflection and we are proud of our achievements, butwe alsoknow that we cannot standstill in the face of known and unknown challenges to our business and indeed to the sector as a whole. We have set out ourfuture plans as well and we look forward to reporting continued success in the achievement of these.
  • This statement will be added to our Annual Accounts for 2014/15 and it will be published on our website to provide up to date reporting to all our stakeholders.

Our audited Annual Accounts for 2014/15 can be found on our website at:unityha.co.uk

1.7We are committed to transparency in relation to our actions and achievements and indeed we are proud to present what we do to our customers and partners. We are also keen to have an open 2-way dialogue with all observers of our activities and therefore comments and questions are invited. We look forward to hearing how we might be able to improve what we do and how we do it; therefore,if you wish to contact us please do so on (0113) 2007700 or

2VALUE FOR MONEY STRATEGY AND LINK TO CORPORATE OBJECTIVES

Context

1.1

2.1

2.1Our VFM Strategy,which was first approved by the Boardin 2011/12,has been developed to underpin our mission and is regularlyreviewed to ensure its relevance to changing economic and social circumstances.We believe that delivery of VFM needs to be provided in the context of our mission and values as well as our corporate objectives.

Mission

2.2Unity HA’s mission is to:

‘Provide housing choice, improve life opportunities and address inequalities’

Core Values

2.3This is underpinned by our core values which are:

  • Integrity - being honest, transparent and sincere with strong principles
  • Respect- in the way we treat people, service users and each other
  • Flexible - in how we work for the benefit of our tenants, other people, the organisation and each other
  • Commitment - to provide services to meet the needs of our tenants, local people and local neighbourhoods
  • Business focussed – continually review and adopt best practice and ensure we operate efficiently and effectively in order to make best use of resources
  • Equality and Fairness- in the way we work and deliver our services

Our Corporate Objectives

2.4Our corporate objectives and priorities are set out in our business plan that is reviewed and approved by the Board each year. Our six main objectives are summarised as follows:

  1. Provide and continue to develop good quality mixed tenure housing which reflects needs and aspirations – we will ensure the highest standards of repair and maintenance of our existing stock. We will continue to develop new high quality stock in geographic areas of Leeds where members of the BME community would choose to live. Our new development programme will consist of the type and tenure of unit for which we know there is a growing need.
  2. Provide high quality affordable housing services– we aim to achieve the highest level of tenant satisfaction through the delivery of a range of flexible high quality services which respond to the needs of our current tenants. We will take account of emerging needs of new tenants and redesign our services accordingly. We will be sensitive to the needs of existing and new tenants in regard to the current economic climate and the Government’s legislative programme.
  3. Involve and work with our tenants and the communities we serve to inform and improve services– we will engage with our tenants and BME communities to develop a good evidence base to help us design our services and influence the policy and delivery of services to others. On this basis we will seek to represent BME communities, and others, in the multi-cultural neighbourhoods within which we work.
  4. Work with partners to encourage and support the regeneration of our target neighbourhoods– we will work in partnership to deliver physical, social and economic regeneration programmes to help create and sustain neighbourhoods where BME communities want to live. We will focus our efforts in those neighbourhoods where our tenants live and where there are high percentage of BME communities. We will aim to deliver and facilitate the delivery of services based on our understanding of current and future needs. We will continue to ensure our tenants have the best advice and access to training and employment opportunities and we will aim to promote and sustain financial inclusion.
  5. Provide and facilitate business support services and encourage local enterprise– through our Unity Enterprisecompany we will offer affordable managed workspace to support the needs of a wide range of small businesses and other organisations. We will provide direct support to encourage local enterprise and we will offer business advice to our existing business tenants. Through these services we will aim to support the economic regeneration of our target neighbourhoods.
  6. Be a progressive and expanding business with a sound resource base– we will be astrong and forward looking organisation. We will have a robust financial plan to support the delivery of high quality services and new development. Our governance and performance management arrangements will be of the highest standard and we will be a place where people want to work.
  7. VFM clearly underpins many of these aims, but is perhaps most clearly focused in the delivery of objective 6, which is where we plan, manage and control our activities in the pursuit and delivery of value for money. The rest of this statement outlines our strategy for VFM for money and records our current and proposed actions in all these matters.

Value for Money Strategy

2.6Unity’s Value for Money Strategy incorporates7 key objectives, which are listed below:

REF / OBJECTIVES
1 / To embed VFM and continuous improvement into the organisation’s culture
2 / To adopt good practice in relation to VFM, reducing the risk of exposure to financial and material waste
3 / To benchmark and review VFM in relevant services
4 / To involve stakeholders and tenants where relevant in achieving VFM
5 / To ensure we comply with our green strategy when considering VFM
6 / To consider using a range of procurement practices to achieve VFM where appropriate
7 / To pursue VFM by setting and monitoring VFM targets and efficiency savings

2.7These objectives underpin and provide clear direction for our pursuit of VFM.

Our full VFM Strategy can be found on our website at: unityha.co.uk

3VALUE FORMONEY – OUR APPROACH

3.1

3.1Unity’s approach to VFM has been to ensure that this is integral to the way in which we operate as a business. We reflect this in our values and particularly through our value of ‘commitment’ to our tenants. This is not just about providing services for tenants but about ensuring that they are delivered in the most cost effective way reflecting tenants’ needs and views.

3.2Our business effectiveness approach to VFM as opposed to cost-cutting ensures that we understand the value of activities as well as the costs of these. It is also considered vital that we understand the balance between cost and quality and we achieve this by:

  • Investing in homes and services that matter most to our tenants – fully understanding the cost of everything we deliver;
  • Regularly assessing and reviewing the services we provide to see if we are getting value for the costs;
  • Agreeing clear, achievable and measureable efficiency targets through our business planning process;
  • Showing the social benefits of what we have done;
  • Ensuring all staff understand their responsibility and role in delivering VFM.
  • We are committed to being effective in the management of resources so that we can continue to invest and re-invest in cost effective, quality services to our customers whilst creating the financial capacity to provide new homes and additional services which benefit the communities that we serve. We have adopted a range of practices to embed VFM across the business:
  • Achieving VFM has always been at the core of our business, but in recent times we have developed a more structured approach to planning, monitoring and reporting our achievements. In the past we could perhaps have been said to have played down our achievements, preferring to concentrate on achieving outcomes and results. More recently we have sought to ensure that all our key stakeholders are able to gain a transparent view of our outputs as this enables a comparison to be made with alternative providers.
  • We regularly report to the Board of our performance against our plans, which enables us to secure effective governance and oversight of our strategic approach to VFM and achievement of our business objectives.
  • The Board has ensured that a long term VFM action plan and VFMefficiency logare in place documenting efficiency improvements, which provide financial as well as social returns.
  • Budgets and business plans include efficiency targets and improvements in services based on action plans. We engage in rigorous sensitivity testing and we assess all our risks and we have developed measures to manage and mitigate the impact of these. In addition to routine sensitivity testing, we have also developed a robust approach to stress testing the business plan and we are developing effective recovery contingencies to be deployed in the event of a serious threat to the business.
  • TheSenior Management Team with the support of the Finance Manager take the lead on the implementation of strategy and help to drive the delivery of VFM , ensuring that a culture which seeks to maximise achievement of our aims is embedded and hard-wired into policy and practice.
  • At Unity, we underpin our aims to deliver VFM by ensuring that our residents have transparent access to our achievements as well as every opportunity to express their views and requirements regarding service priorities. In particular, we are developing the Tenant Scrutiny Panel to play a key role in challenging our performance, priorities and services, thereby helping to deliver better VFM.
  • We are keen to combine our range of professional expertise where there are benefits to be had, in order to provide added value and VFM. For example, finance and asset management expertise were combined in our recent component analysis exercise, which has provided an insight into the potential additional life of components over and above stock condition survey data and more understanding of potential savings.
  • Our continued focus on controlling arrears, minimising the incidence of void stock, reducing re-let times and keeping downward pressure on operating costs provides clear benefits to our financial health. All of this enables the Board to ensure that the business receives investment to ensure that it keeps up to date in relation to systems and technology, but more importantly it provides the Board with choices for targeted investment in the priorities that have been highlighted by our customers. With a changing and challenging economic environment,it is increasingly important to review our performance and processes to help maximise VFM.

4VFM GAINS – PAST AND PRESENT AND HOW WE RE-INVEST

VFM gains - financial performance

4.1The Association makes effective use of its financial strength and capacity to support its objectives and spending priorities, but this is only possible through the consistent delivery of excellent financial results. The following table illustrates how we have consistently improved our financial performance year on year:

2015 / 2014 / 2013 / 2012 / 2011
£000 / £000 / £000 / £000 / £000
TURNOVER / 5605 / 5407 / 6196 / 5542 / 4859
Operating costs / (4040) / (3986) / (4935) / (4644) / (4118)
----- / ----- / ----- / ----- / -----
1565 / 1421 / 1261 / 898 / 741
Sale fixed assets / 24 / 8 / 12
Interest Received / 72 / 32 / 27 / 42 / 42
Interest Paid / (575) / (454) / (431) / (516) / (516)
----- / ----- / ----- / ----- / -----
SURPLUS / 1086 / 1007 / 857 / 424 / 279
===== / ===== / ===== / ===== / =====

4.2We analyse our financial results to produce more accessible charts derived from standard ratios. The following charts usefully illustrate how our income is spent as well as the fact that we are controlling costs, delivering steady and positive improvement in our financial results, many of which compare favourably with the results of our peers and indeed of the sector as a whole.

Analysis of how each pound of rent is spent

4.3The way that we spent each pound of rent in 2015 is illustrated in the following table:

4.4In addition to the spend profile that is outlined above (as a result of accounting treatment) it should be noted that the surplus includes £529k of capitalised repairs components.

4.5Details of the different categories are as follows:

  • Void costs (1p) - This relates to the cost of works to homes that are vacated and require work, to bring them up to a lettable standard, before they are allocated to new tenants.
  • Routine repairs (10p)– This covers the responsive repairs that are reported by tenants.
  • Planned repairs(5p)– This covers planned and cyclical maintenance such as roofing and new window programmes.
  • Loan interest (11p)- This refers to the money that Unity has to pay on loans that it has taken out to build new homes.
  • Service charges (2p) – This includes items such as grounds maintenance, care alarms and communal areas.
  • Management costs (31p) –This includes the costs of staff and offices and other related costs.
  • Other costs(17p)- This covers other items such as insurance and Information Technology.
  • Surplus(23p)- This is the proportion of rent money that is left over after all the other items have been paid for from the rental income. It is kept for future investment in existing and new homes as well as new services.
  • The generation of ongoing surpluses from rents provides an important degree of financial stability, which is both prudent and important in times of changing national policy.

VFM gains - financial

4.7Operating Surplus - The following table shows how Unity has successfully increased its operating surplus year on year over the past five years from £279k in 2011/12 to £1.071k in 2014/15. This has increased steadily year on year, proving to be helpful given the adverse changes tothe sector’s rent regime that were announced by the Chancellor in July 2015.

4.8Operating Costs– Whilst our surpluses have increased, our operating costs have been reducing for the past three years, as a proportion of turnover. The next graph illustrates this trend.

4.9Turnover- In the past 12 months our turnover has increased from £5,400k to £5,600k reflecting rent increases and revenue from additional stock (51 units).

4.10Savings by Area- We analyse our savings by budget area, so we have a better understanding of where contributions are being identified. We also analyse the savings over time so we can identify the ongoing contributions from specific areas.

Sector and UK issues which we recognise as challenges to VFM

4.11Notwithstanding our positive record of financial performance we remain cautious about the wider impacts on our business and we note that further cuts to welfare benefits recently announced are likely to impact on the Association. TheChancellor’s Budget Statementin July 2015, which followed the outcome of the General Election,revealed a range of policies,the potential impact of which,we are now assessing. Policies and issues include the following:

  • The government’s decision to extend the Right toBuy to 1.3 million housing Association tenants. This could have quite a significant impact on the sector and therefore we are actively modelling the potential impact and business actions which might help to mitigate this. Our current view is that the potential impact of this policy on Unity will be limited, with little impact envisaged in relation to the delivery of our plans.
  • The Chancellor unexpectedly tore up the rent formula, which had previously set rises on social housing rents at the Consumer Price Index of inflation plus 1% until 2026. Instead, housing Associations and stock-holding councils are now required to reduce rents by a flat 1% a year for four years. We have already modelled the impact of this for Unity and are considering a range of mitigation measures to address the future loss of income in the business plan.
  • The government plans to make a further £12 billon of cuts to the welfare budget. These include a reduction of the total household benefit cap to £20,000 outside London and removal of housing benefit for 18 to 25year-olds on Jobseeker’s Allowance. The Association is committed to managing the potential impact on the business through effective monitoring and proactive business risk assessment.
  • The government has announced plans which could create opportunities for the Association. In measures which seek to address the ‘housing crisis’ the government has said that it will build 275,000 additional ‘affordable homes’ by 2020 and it will double the number of custom and self-built homes by 2020 through a new Right to Build which would force councils to give land to self-builders. 200,000 new ‘starter homes’ and a Help to Buy ISA were also announced in May 2015 and the government has said that it plans to require councils to keep a register of brownfield land and to ensure that 90% of suitable brownfield land has planning permission by 2020.
  • In other announcements, the government has said that:
  • It will ban EU migrants from being considered for a council house unless they have been living in an area for four years and it will require all landlords to check the immigration status of prospective tenants.
  • It is in favour of extending provisions of the Freedom of Information Act to housing associations. This could result inadditional administration for the Association, as retrieving stored information, determining confidentiality and exemptions to the Act will increase the administrative burden on the Association if this comes to pass.
  • In the light of the foregoing we will maintain a positive outlook given our track record of performance. We are confident that our business processes that have generated these strong results will enable us to monitor and manage the changes that now being implemented or in the pipeline.

VFM gains – operational performance